(43 days ago)
I hate to rain on this parade. But the latest lurch upwards in stock prices has just taken market valuations up into the skybox levels, according to the market timing measure with the longest pedigree on Wall Street. It’s just gone from flashing amber to flashing red - meaning, if it’s right, that there is now a significant and rising risk of a crash, and a bigger risk of simply very poor returns.
This has little to do with President-elect Donald Trump, by the way — and much more to do with President Ulysses S. Grant and all his successors.
Wall Street’s jump this week has taken the S&P 500 to an eye-watering 27.9 times the corporate earnings of the past 10 years. That’s according to data compiled by Yale finance professor Robert Shiller and some simple math.
This is about the same level that the market hit just before the crash of 1929, and is far higher than was seen in 2007, for example, or during the ill-fated boom of the late 1960s. The last time we saw the stock market this expensive on this measure was early in 2002 — just before stocks plummeted.
But i reckon the Party will go on into 2017